Claritev CorpCTEV
Claritev Corp Income Taxes Disclosure
Income Taxes
The Company does not have significant operations in foreign jurisdictions. The benefit for income taxes are as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 31,719 | $ | 63,104 | $ | 81,479 | |||||||||||
| State and local | 7,993 | 10,022 | 17,218 | ||||||||||||||
| 39,712 | 73,126 | 98,697 | |||||||||||||||
| Deferred | |||||||||||||||||
| Federal | (108,022) | (166,453) | (104,298) | ||||||||||||||
| State and local | (20,486) | (31,555) | (9,762) | ||||||||||||||
| (128,508) | (198,008) | (114,060) | |||||||||||||||
| Total benefit from continuing operations | $ | (88,796) | $ | (124,881) | $ | (15,363) | |||||||||||
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law which included changes to certain tax laws. The tax law allows for the immediate expensing of capitalized software development costs, including provisions that impact prior treatment of these costs, as well as other positions favorable to the Company. Excluding interactions with other
IRC regulations, these provisions favorably impacted deferred tax assets by approximately $80.5 million as of December 31, 2025.
Many of the tax provisions of the OBBBA are designed to accelerate tax deductions, which could lead to lower cash tax payments. The new tax law did not materially impact income tax expense or our effective tax rate during the year ended December 31, 2025. We will continue to monitor the impact of the OBBBA and the range of potential outcomes, which will depend on our facts in each year and anticipated future guidance from the U.S. Department of the Treasury.
The TCJA and the Coronavirus Aid, Relief and Economic Security Act continue to be applicable to the Company’s provision for income taxes for the years ended December 31, 2025, 2024 and 2023. Income tax effects resulting from changes in tax laws are accounted for by the Company in accordance with the authoritative guidance, which requires that these tax effects be recognized in the period in which the law is enacted.
The pre-tax loss during the years ended December 31, 2025, 2024 and 2023 of $373.1 million, $1,770.7 million and $107.1 million, respectively, generated an income tax benefit of $88.8 million, $124.9 million and $15.4 million, respectively. The Company also recorded a cumulative deferred provision in Other comprehensive income (loss) of $1.3 million, $2.1 million and $3.7 million, respectively.
The reconciliation of the tax provision at the U.S. federal statutory rate of 21% to the provision for income taxes and the effective tax rate after the adoption of ASU 2023-09 is as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| U.S. federal statutory tax rate | $ | (78,346) | 21.00 | % | |||||||
State and local income taxes, net of federal income tax effect (a) | (9,870) | 2.64 | % | ||||||||
| Foreign tax effects | — | — | % | ||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | % | ||||||||
| Effect of cross-border tax laws | — | — | % | ||||||||
| Tax credits | |||||||||||
| Research and development tax credits | (4,668) | 1.25 | % | ||||||||
| Changes in valuation allowances | 560 | (0.15) | % | ||||||||
| Nontaxable or nondeductible Items | |||||||||||
| Other | 3,528 | (0.94) | % | ||||||||
| Changes in unrecognized tax benefits | — | — | % | ||||||||
| Other adjustments | — | — | % | ||||||||
| Effective Tax Rate | $ | (88,796) | 23.80 | % | |||||||
( a) States: NY, CA, IL, MA, MN, NJ make up greater than 50%.
The reconciliation of the tax provision at the U.S. federal statutory rate of 21% to the provision for income taxes and the effective tax rate for years prior to the adoption of ASU 2023-09 is as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Tax at statutory | $ | (371,850) | $ | (22,483) | |||||||
| Non-deductible expenses | 51 | 71 | |||||||||
| Equity compensation plan | 989 | 1,449 | |||||||||
| Non-deductible change in fair value of Private Placement Warrants and Unvested Founder Shares Liability | (100) | (413) | |||||||||
| State taxes (net) | (17,010) | (1,873) | |||||||||
| Valuation allowance | — | 17 | |||||||||
| Goodwill and indefinite lived assets impairment | 264,949 | — | |||||||||
| Non-deductible compensation | 790 | 45 | |||||||||
| Tax credits | (2,967) | (531) | |||||||||
| Transaction costs | — | 688 | |||||||||
| Other | 267 | 11 | |||||||||
| State deferred rate changes | — | 7,656 | |||||||||
| Total | $ | (124,881) | $ | (15,363) | |||||||
The effective tax rate for the year ended December 31, 2025 differed from the statutory rate primarily due to non-deductible stock-based compensation expense, limitations on executive compensation, tax credits and state tax benefit.
The effective tax rate for the year ended December 31, 2024 differed from the statutory rate primarily due to non-deductible stock-based compensation expense, limitations on executive compensation, non-deductible goodwill impairment, tax credits and state tax benefit.
The effective tax rate for the year ended December 31, 2023 differed from the statutory rate primarily due to non-deductible stock-based compensation expense, non-deductible mark-to-market liability, limitations on executive compensation, non-deductible transaction costs, changes in the Company’s deferred state tax rate due to the BST acquisition, tax credits and state tax benefit.
The Company incurred an impairment charge of $1,469.0 million in the year ended December 31, 2024 which was treated for income tax purposes in accordance with ASU 2017-04. Of this impairment charge, $1,344.0 million resulted in an income tax expense of $282.3 million, since it is permanently non-deductible for income tax purposes.
The following are significant deferred income tax assets and liabilities (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Allowances on trade accounts receivable | $ | 105 | $ | 100 | |||||||
| Net operating loss carryforwards | 255 | 255 | |||||||||
| Capital loss carryforwards | 2,087 | 1,446 | |||||||||
| Accrued expenses and reserves | 12,106 | 9,556 | |||||||||
| Interest limitation carryforward | 200,710 | 159,325 | |||||||||
| Leases – right-of-use liability | 5,043 | 4,395 | |||||||||
| Transaction expenses | 13,771 | 18,136 | |||||||||
| Hedging | 1,316 | 1,597 | |||||||||
| Refinance Transaction | 71,651 | — | |||||||||
| Valuation allowance | (2,087) | (1,446) | |||||||||
| Deferred income tax assets | 304,957 | 193,364 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Intangible assets | 420,389 | 498,011 | |||||||||
| Depreciable assets | 77,917 | 16,605 | |||||||||
| Leases – right-of-use asset | 3,379 | 3,891 | |||||||||
| Other | 871 | 691 | |||||||||
| Deferred income tax liabilities | 502,556 | 519,198 | |||||||||
| Net deferred income tax liabilities | $ | 197,599 | $ | 325,834 | |||||||
The Company has no remaining NOL carry forwards for federal income tax purposes as of December 31, 2025 and 2024. The Company has net operating loss carryforwards for state income tax purposes of $0.3 million as of both December 31, 2025 and 2024. The Company has disallowed interest carry forwards for federal income tax purposes of $835.4 million and $200.7 million tax effected as of December 31, 2025, $663.2 million, $159.3 million tax effected as of December 31, 2024, that will be available to reduce future taxable income, subject to certain income limitations and which have an indefinite carryforward period. The Company believes it is more likely than not that these interest carryforwards will be fully utilized considering the weight of all positive and negative evidence under current tax laws.
During 2025, the Company incurred a capital loss on its sale of an equity investment. The resulting capital loss was recorded as a deferred tax asset. The Company also recorded a corresponding valuation allowance since it concluded it is more-likely-than-not that the Company will not generate capital gains to offset the capital loss.
During 2020, the Company marked-to-market certain investments which would result in a capital loss deferred tax asset for which the Company recorded a corresponding valuation allowance. As of December 31, 2025, the Company kept the valuation allowance related to the remaining estimated capital losses in excess of capital gain based on the difference between the tax and book balance of these investments. It is more likely than not the Company will not generate capital gain income to offset these losses.
The Company does not have reserves for uncertain tax positions. Any need for a reserve or changes in a reserve would be a component of the Company's tax provision. The Company includes interest and tax penalties as part of the tax provision. The Company does not reasonably expect any other significant changes in the next twelve months.
Various regulatory tax authorities periodically examine the Company's and its subsidiaries' tax returns. Tax years December 2022 through 2025 are open for Federal examination. Tax years 2021 through 2025 are still open for examination related to income taxes to various state taxing authorities.
The amount of cash federal income taxes paid and cash state income taxes paid, net of refunds by the Company during the year ended December 31, 2025 were $36.7 million and $7.8 million, respectively.
The amount of cash income taxes paid, net of refunds by the Company during the years ended December 31, 2024 and 2023 was $80.1 million and $100.1 million, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Mar 16, 2021 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.